The effect of vendor managed inventory (VMI) dynamics on the Bullwhip Effect in supply chains

Disney, Stephen Michael ORCID: https://orcid.org/0000-0003-2505-9271 and Towill, Denis Royston 2003. The effect of vendor managed inventory (VMI) dynamics on the Bullwhip Effect in supply chains. International Journal of Production Economics 85 (2) , pp. 199-215. 10.1016/S0925-5273(03)00110-5

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Abstract

The paper compares the expected performance of a vendor managed inventory (VMI) supplychain with a traditional “serially linked” supply chain. The emphasis of this investigation is the impact these two alternative structures have on the “BullwhipEffect” generated in the supply chain. We pay particular attention to the manufacturer's production ordering activities via a simulation model based on difference equations. VMI is thereby shown to be significantly better at responding to volatile changes in demand such as those due to discounted ordering or price variations. Inventory recovery as measured by the integral of time×absolute error performance metric is also substantially improved via VMI. Noise bandwidth, that is a measure of capacity requirements, is then used to estimate the order rate variance in response to random customer demand. Finally, the paper simulates the VMI and traditional supply chain response to a representative retail sales pattern. The results are in accordance with “rich picture” performance predictions made from deterministic inputs.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics) Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HF Commerce
Uncontrolled Keywords:	Bullwhip; Forrester Effect; VMI; Supply chains; Inventory control
Additional Information:	Pdf uploaded in accordance with publisher's policy at http://www.sherpa.ac.uk/romeo/issn/0925-5273/ (accessed 01/07/2014)
Publisher:	Elsevier
ISSN:	0925-5273
Date of First Compliant Deposit:	30 March 2016
Last Modified:	07 Nov 2023 03:29
URI:	https://orca.cardiff.ac.uk/id/eprint/38149

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